For many years, when asked to speak about the British economy, I used to point out that the influence of technological progress on productivity allowed an average growth rate of 2.25% to 2.5% a year. This meant that living standards could double every 25 years or so. Political battles raged over the sharing of the growth, but on the whole most people gained to some extent.
No longer! Beneath all the fanciful predictions emanating from this tired government come the hard facts from the independent Office for Budget Responsibility (OBR), the Resolution Foundation and the Organisation for Economic Co-operation and Development. A collapse of investment, with more and more international corporations deciding Britain is no longer the place to invest for a foothold in the European market. And dire forecasts of a 6% fall in living standards in the next two years. Some platform for an election, eh?
After growing quite fast in the 10 years to the 2008 financial crisis – assisted not least by the opportunities afforded by our membership of the European single market – and then being hit by a decade of needless and damaging austerity, investment, which is the seedcorn of economic growth, came to a halt. First it was the policy of austerity itself that savaged the public sector investment on which the private sector and higher living standards depend. Then it was Brexit. Productivity? The OBR thinks Brexit has knocked 4% a year off the nation’s productive potential; my old friend Jagjit Chadha, director of the National Institute of Economic and Social Research, says it puts the loss at nearer 5.5%.
Investment has stagnated, and hence growth has also stagnated. We have not been helped by the blow to our terms of trade – the fall in the purchasing power of our exports vis-a-vis imports – caused by the ramifications of the war in Ukraine. But that applies to other countries too. What makes us the poor man of Europe, with a worse economic performance than the rest of the G7 advanced industrial countries, is the blow to our trade from the continuing, and all the while worsening, impact of Brexit.
Both major party leaders are in denial about this. True, relations with France and Germany are on a better footing since the egregious Liz Truss’s remark that the jury was out on relations with President Macron. But a return of civilised values and common decency, while welcome, is no compensation for the self-inflicted wounds of Brexit.
Despite all this stuff about how it will take years to reverse that catastrophic referendum decision, my Brussels contacts give me the strong impression that our former partners feel our, and their, pain, and would be relieved if we showed some leadership in the obvious matter of rejoining soon, provided we were serious about it.
Which brings me to a most incisive article written recently in, of all places, the Times newspaper’s Saturday magazine. It was by the football writer Martin Samuel. Amid all this nonsense that Brexit was a good idea but mishandled, the import of Samuel’s message was: “Brexit, like Communism, is failing because it is a rotten idea.” Again, he says: “The last resort is the excuse that your big idea only failed because it wasn’t done right.”
Now: Sunak is a Brexiter; Starmer isn’t – or, rather, wasn’t. But notwithstanding the huge difference in Labour’s favour in the opinion polls, could Sunak upstage Starmer on Brexit? I should like to draw attention yet again to what the prime minister told the Northern Irish people when negotiating his Windsor framework. “If we get the executive up and running, Northern Ireland is in the unbelievably special position … in having privileged access not just to the UK home market, which is the fifth biggest in the world, but also the European Union single market. Nobody else has that. No one.”
But we did! Just how pragmatic is Sunak – whose initial approach to the premiership has undoubtedly been winning plaudits from reluctant sources?
Personally, I think the current Conservative party needs a long spell in the wilderness. Those of us who have known it when it was good at resisting fatuous ideologues were granted a real treat recently when Michael Heseltine was the guest for a regular Financial Times feature, “Lunch with the FT”.
Heseltine, always a man of action, played a crucial role in the revival of Liverpool and London’s Docklands. He was defeated by John Major for the succession to Margaret Thatcher in 1990 but my impression was that the triumvirate of Major, Heseltine and Chancellor Kenneth Clarke did their best for the Anglo-EU cause between 1993 and 1997, before their party descended into the Stygian depths of Euroscepticism.
At all events, Lord Heseltine, when asked by the FT whether we could re-enter the EU in his lifetime – he recently celebrated his 90th birthday – said: “I think the answer is yes.”
I hope so!
